PAL hurting from FAA downgrade

Published: January 23, 2008 | Author: Krystina Orozco
Total Views: 1034 | Philippine News
SAN FRANCISCO — Downgrading the Philippines’ air safety rating has dealt a hammer blow to tourism in the country and scuttled, for now, ambitious plans by Philippine Airlines to expand to New York and Chicago. U.S. Federal Aviation Authority reduced the country’s air safety rating to Category 2 from Category 1, restricting Philippine Airlines from increasing its flights to the U.S. and from changing the type or number of aircraft. PAL now flies direct to San Francisco and Los Angeles. Philippine Tourism Secretary Joseph Ace Durano said the downgrade “seriously affects” the expansion plans of the civil aviation sector to increase Manila’s access to and from the United States.

Philippine Airlines President Jaime Bautista admitted the downgrade jeopardizes their expansion plans. “Our expansion plans, if this matter is not resolved soonest, are being put in peril,” he said, adding in a slight dig to Manila that the government should “do its homework.” The Manila government tried to put its best spin on the debacle.

“The DOT will not let this issue affect the promotional activities lined up for this year, particularly those that reach out to tourists from the United States. We will continue to create and implement strategic ways to help the country maintain its strong presence among the American travel market,” Durano said in a statement. The U.S. is the Philippines’ second largest market, producing a total of 578,983 travellers in 2007.  This figure represents 18.7 percent of the total foreign arrivals to the country last year. The tourism industry also generated a total of $4.885 billion last year. For 2008, the DOT intends to bring in tourist receipts worth of $5.8 billion. Durano added, “We are calling on the various travel agencies, airlines, and other partners in the travel and trade sector to enjoin us in assuring our potential tourists that the Philippines remains to be an ideal and safe destination.”

One Filipino American shrugged off the downgrade. “I have been flying PAL for eight years (and will continue to do so),” frequent flyer June Mulimbayan of San Francisco told Philippine News. He said the news would not affect his decision to use PAL for future flights. As a result of the FAA verdict, PAL’s 2008 growth projections are being revised.

PAL is the only Filipino airline that flies to the United States, which accounts for 30 percent of revenue. The airline has projected that this would increase to 40 percent with planned new services. “That FAA downgrade, however, means our capacity to operate will be limited. Our existing U.S. flights are not affected, but our planned flight expansions may need to be delayed. Even with new planes, we cannot fly these to the U.S.,” Bautista said in an interview with a financial publication.
President Gloria Macapagal Arroyo has named Transportation Secretary Leandro Mendoza as concurrent ATO chief and gave him a “three-month deadline to take care or to address the administrative and technical issues” raised by the FAA, presidential spokesman Ignacio Bunye said. The president’s actions should “remedy whatever technical deficiencies there are,” Bunye added.

Last year as it emerged from eight years of receivership, PAL increased its load factor by 77 percent and carried 7.4 million passengers, more than half a million above target. “We are working on revising our projections this year because of the FAA decision,” Bautista said. PAL’s load factor is up to 80 percent this year.

He further said PAL is to take delivery of five Airbus 320 aircraft this year, while six new Boeing 777-300ERs are to come in between 2009 and 2011. PAL plans to use the smaller Airbus 320s to boost flight frequencies to U.S. territories in the Pacific and use the wide-bodied Boeings to expand its U.S. continental routes as well as Hawaii.

PAL has been urging the ATO to “rectify the assessed deficiencies in its air safety oversight functions so the country can revert to Category 1,” Bautista said. PAL insists the FAA decision is a temporary setback. “We are still taking delivery of the planes we have purchased. We are committed to buy these planes and we have contractual obligations to pay for these planes,” said Bautista.

PAL will complete this year its purchase of a fleet of 21 A320s together costing $1.2 billion. Bautista disclosed that PAL is considering leasing or buying outright another five A320s worth 300 million dollars. Another drain on PAL is that it may be forced to lease planes and crews from other airlines in the Category 1 country, as it had done in the past, to increase the service on a route. “We have sent proposals to financiers and are awaiting a response from them,” Bautista said. — With AFP